Land Tax - Better buying in separate names or two names?

If a man & woman have no investment properties and are about to start investing, are there any benefits for them to buy each property separately in their own names rather than together from a land tax perspective? I believe not because it will be aggregated. Is this correct? What about from other perspectives other than land tax are there any other benefits?

 

What are you basing this on?

 

I know of no state that aggregates land holdings for spouses. Different companies may be aggregated but never heard of spouse holdings.

Land tax is state legislation so the laws differ from state to state, what happens in NSW is completely different to that of QLD for example.

In NSW land tax will be less if sole ownership of 2 properties - 1 each, compared to 2 jointly. In QLD there would be no difference.

See
Tax Tip 30: How to Minimise land tax in NSW Tax Tip 30: How to Minimise land tax in NSW

 

Do people need to register all investment properties for land tax even though they will be below the land tax threshold? Eg. they buy their 1st investment property.

 

How does it work in NSW if say there's husband, wife and an adult child. One investment property is owned jointly by husband/wife and land value is $1 million. The 2nd investment property is owned by all three being husband/wife/child and land value is $1 million. How does the land tax get calculated in this example? Appreciate if someone can explain this.

 

Assessment - Linky
Calculator - Linky

 

Jointly assessed as one and then a secondary assessment with provision to avoid double taxation.

I have a tax tip on this

 

Land tax for NSW calculation

Property 1 owned jointly by Dave and Jessie 800k land value
Property 2 owned by Dave 700k land value

Land tax for 2019 threshold is 692k

Calculation as follows.

Dave and Jessie receive a threshold of 692k for the property they own together:
$800,000 - $692,000=$108,000 x 1.6% + $100= $1,828.00 land tax for 2019

Dave own in his own right LV 700k plus Jessie interest in the joint of 400k taxable land value totaling $1,100,000.
$1,100,000 - $692,000=$408,000 x 1.6% + $100= $6,628.00 land tax payable on total land value for 2019

double taxation which is lesser calculation:

1. $400,000/$800,000 x $1,828 = $914.00

2. $400,000/$1,100,000 x $6,628 = $2,410.18

So Dave deduction is $914.00, so the total Land tax for 2019 for Dave will be
$6,628 - $914 = $5,714.00

My question is how Jessie Land Tax is calculated?

Is it as follow:
$800,000 - $692,000 = $108,000 x 1.6% + $100 = $1,828

So Total land tax for 2019 for Jessie will be $1,828? or she only pay $914(50%) and Dave contribute another $914?

Dave and Jessie want to pay their land tax accordingly, they are not married and Jessie only have that jointly property.

Alot of the infor is doing the calculation for Dave but doesn't mention how much Jessie have to pay.

Can someone please help me to verify the calculations how much Dave and Jessie have to pay total land tax separately.

thanks advance

 

This may be of interest:

Tax Tip 124: NSW Land Tax: Comparison of Joint v Single Ownership Tax Tip 124: NSW Land Tax: Comparison of Joint v Single Ownership

 

hi Terry,

I have read that, but it still doesn't tell me how much each pay for land tax, may be because I not an expert.

Can you help me with my example, so that I can understand it correctly please.

I understood double taxation, which meant I don't have to pay $914(50%). I think

I assuming I ONLY pay $5,714.00.

But does Jessie pay $1,828 as her total land tax? that the question I want to ask.

 

I am not able to go through your calcs. You would need to work it out yourself or seek legal advice.

 

Firstly, each state in Aus has different rules and regulations on how land tax is treated. So clarify what state you are in.

You mentioned NSW so..

Participants; Dad Mum Child

IP worth $1m owned by Dad & Mum, it is IP so you would pay land tax on this.

2nd IP worth $1m is owned by Dad & Mum & Child, it is IP so all owners would pay land tax on this.

-wheres the PPOR??

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My understanding of land tax treatment in NSW is, a property is owned by a party (in your instance Dad, Mum and Child).
The land tax liable for property Y is X, and the owners of property y would pay this.

Additionally, another property only owned by two people, i.e. Dad & Mum, another Notice of Valuation is issued to the parties whom owned property Z, and is liable for land tax of V.

In short, the land tax liability is attached to the Notice of Valuation which is addressed to the parties owning said land.

If all Dad, Mum and Child own three properties, and only 1 Notice of Valuation is issued, the PPOR is exempt from the 'aggregate land value' of the properties. For instance;

Property A - PPOR - taxable land value of $1m (however exempt)
Property B - IP - taxable land value of $2m
Property C - IP - taxable land value of $3m

Aggregate taxable land value = $5m BUT less threshold of $692k = $4.308m @ 1.6% + $100.
which is payable by all three owners.

Note that is the simplified version, and does not account for the average of the last land values over the previous three base dates.
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In terms of tax benefits? I think that needs to get answered by a tax professional. All I can think of is negative gearing..

However, I have heard (rumours) of family members whom individually own properties to avoid land tax, don't quote me on the legalities and legitimacy of this scenario and how it conflicts with 'having resided to the prior valuing year'.

Property A - PPOR of Dad - taxable land value of $1m (exempt due to PPOR)
Property B - PPOR of Mum - taxable land value of $2m (exempt due to PPOR)
Property C - PPOR of Child - taxable land value of $3m (exempt due to PPOR)

 

Under NSW law 2 people owning 2 IP together would pay more land tax than each owning one separately. This is because there is 1 threshold for joint owners but one each for sole owners.

What do you mean by child? A dependent minor child won't get a separate PPOR exemption to the mum and dad and mum and dad will not get one each either
Only one per family.

Accountants/tax agents cannot advise on land tax as it is state legislation only solicitors can.

 

From a taxation perspective this scenario is incorrect :
Property A - PPOR of Dad - taxable land value of $1m (exempt due to PPOR)
Property B - PPOR of Mum - taxable land value of $2m (exempt due to PPOR)
Property C - PPOR of Child - taxable land value of $3m (exempt due to PPOR)

The CGT Main Residence exemption requires all the family have one main residence (in some limited situations they can share two ie 50% each). A minor cannot have a different main residence to the parent/s.

And under NSW land tax laws a strict test of principal place of residence applies to the exemption in Schedule 1A of the Act. Refer to Clause 2. Note the word "principal". And then refer to Clause 12. Even if the family occupy two different homes only one may be considered exempt and the reference to "principal" will be a factor in the Commissioner making that choice. The taxpayer cant choose other than if a valid election is made and the property also meets the principal residence test. Many apply to have their more expensive holiday home exempt but the Commissioner may refuse this.